Qantas Airways Limited Group Essay

Introduction:

Qantas Airways Limited is an Australian iconic airline group engaged in the operation of international and domestic air transportation services and the provision of freight services (Market Line, 2014). The airline also associates its services with the Jetstar brand, with QantasLink, Jetstar Asia and Jetstar Pacific grouped under the same business (Passport 2013). With a 17.7% market share of international passengers in Australia (Business Monitor, 2011), the company aims to upsurge its global market position through a demanding and reconstructive approach. The company has already accomplished a notable degree of achievement locally and internationally with its significant competitive positioning and strong alliance with Emirates and previously British Airways. Though with increasing global forces bestowing as challenges for the business, Qantas has to adapt to the macro-environmental factors appropriately in turn with their internal marketing mix. Clarke (2006) stresses that in a worldwide economical industry, competition is fierce and costs need to be through international eyes, so an arduous analysis of the strategic pillars is needed for the sustainability and improvement of Qantas in the international market.

Internal Analysis

1.1 Strategic Alliances

For the improvement of global marketing performance for a company such as Qantas, a global outlook on the affiliation between market condition, marketing policies and programs and consumer response needs to be developed systematically (Davidson, 1983). The application of internal factors relating to the strategic approach Qantas has applied has developed in an enhancement of its global branding in the international aviation market. Qantas tactically formed a strategic 10-year alliance with Emirates on 31 March 2013 (Passport 2013), to further strengthen its global service across various regions around the world as well as to improve its system coverage. With its international segment continuing to be loss making (Passport 2013), retaining the international division of market share with Emirates includes a permanent shift in their network of destinations that includes Europe, Middle East and Africa; which is evidently a geographic advantage for the airline. The relationship deems more significant than a fixed agreement, including integrated network collaboration with coordinated pricing, sales as well as a benefit-sharing model (Market line 2013). The partnership also coincides with their loyalty program, standardising the benefits for customers across both airlines in turn expanding their business partners on a global level.

1.2 Competitors:

The generated link between market share and competitors is relatively important, as Hazledine (2011) stresses the more competitors there are, the smaller the market share. By forging an alliance with an attractive competitor like Emirates, the company has gained a stronger network in Europe, Middle East and Africa, while gaining a competitive advantage in the international aviation market. However, since the formation of this new strategic alliance, the termination with the previous partnership with British Airways has led to a change in routes and the comprise of its position with Oneworld- an alliance of the world’s leading airlines working as one (Oneworld, 2014) There has been an increase of rivalry by a number of competing airlines targeting Qantas’ lucrative international and domestic routes.

Hazledine (2011), discusses that the Australian market is ‘predominately duopolistic’, with about three quarters of the routes are shared between Virgin and the remaining are Qantas’ monopolies. This implication leads to its dominance in the Australasian market being targeted by other leading aviation companies. The bulk of Qantas’ sales are from Australasia (Passport, 2013), though has been increasing interests from competing airlines seeking to capture their share hold of the region. However, with the significant investment of the expansion of Jetstar in the Asian territory, the notion of retaining a stronger consumer base will significantly intensify due to the construction of new routes with a code-sharing agreement signed with China Eastern (Passport, 2013).

External analysis:

2.1 Economic conditions

In order to sustain their achievement thus far, the ability to capitalise costs and expand travel options for consumers on a global level leaves Qantas to transform its programme entirely, ‘becoming one of the world’s best premium airlines, setting global standards for long haul travel…” (Mules, 2013). Though with the fluctuating inconsistencies in the global sphere, this economically impacts on the business itself. Before the economic downturn, the business illustrated the competitive pressures from Virgin Australia and various low-cost carriers flying to Australia (IBISWorld, 2014). Its competitors highly influenced the profitability of the company with Virgin Blue successfully capturing the market share from Qantas, highlighting 30% – 40% lower costs than those of Qantas (Oxenbridge et al, 2010). The combination of the Global Financial Crisis (GFC) and the inherent volatility of the aviation industry (Financial Management, 2013), meant that in terms of economic environment, many were seeking to lower and affordable services. Jetstar, a positioned association of the Qantas brand, centres on minimizing costs through operational efficiencies (Oxenbridge et al, 2010).

In recognition to this significant investment of Qantas, there has been an increased focus on Jetstar’s expansion into the Australasian region, by building stronger relationships in the effort to replicate the dominant market share of the domestic market to those in the Australasian region. Revenue evidently increased where it eventually reached the stage providing more than 100% of the Qantas group’s profits in 2009 (Danaher et al, 2011). Jetstar’s performance provides an opportunity to focus on Australian traffic into the Asian continent, as demand for low cost carriers remains high in Asia Pacific (Passport, 2013). Furthermore, the rising oil prices seem to reinstate huge challenges to the economic conditions of a company. They directly impact on the profitability of a business and has always been a major component contributing to cyclical nature of economic activity and the demand for air travel (O’Connell and Williams, 2011). With an 18% bill increase in 2012 (Market line, 2013), it pressurizes on the costs and margin of profitability of the company, which has led to an increase to internal and external costs.

2.2 Sociological factors:

Moreover, it is important to recognize the severity of income levels across the heterogeneous market, which may influence sociological issues. The first issue relates to the cost-cutting strategies which have been implemented by Qantas, including segmenting businesses, instituting pay freezes and the outsourcing of functions (Oxenbridge et al, 2010). According to Oxenbridge (2010), Qantas slashed thousands of jobs with redundancies and attrition in order to save costs and switch to lower cost providers. Due to this predicament this has led to shifting operations and agreements offshore, basing their tasks in Dubai ultimately resulting to the significant number of job cuts associated with the employment of the 5-year transformation programme (Mules, 2013).

As profit margins are expected to increase with pressure, this has been an increasing implication for the company who are still establishing aggressive policies, which is ultimately affecting the suppliers and workers of the business. Furthermore, the second relates to the two-brand strategy Qantas has operated to cater for business travellers and leisure carriers. The study of global trends on an international level must be initiated in order to provide the correct service to diverse ranges of markets. With the emergence of their lower cost carrier Jetstar, the company has applied different ranges of classes to accommodate the social needs of their consumers. By operating the services of premium classes to business passengers and lower fare divisions to those of the leisure travellers, restructures the position to appeal to all consumers.

2.3 Environmental factors:

Qantas’ key priority is the reduction of carbon emissions resulting in fuel burn (Holmes, 2013). Their environmental sustainability ensures the future vitality and maintenance for the company and the implementation of programs aids them to become a global environmental sustainability leader in the aviation industry (Qantas, 2014). The effect of their corporate social responsibility can be suggested through the application of minimising carbon emissions and carbon footprint through the introduction of the lower cost fleet, B787 Dreamliner. With its improved fuel efficiency, it is expected to use 20% less fuel (Passport, 2013). Human activities further reiterate climate and environmental issues, which ultimately influence the internal mix of the Qantas group.

2.4 Technological Factors:

The importance of communication technology will always be of significance in regards to the tourism and airline industry (Coles and Hall, 2008).The enhancement of customer experience through the disbursement of modernised technology embedded in all carriers of Qantas has led to the rising operations of customers on a global scale. In an article relating to the key issues of the company, Holmes (2013) depicts the rewarding response in relation to the implementation of “online and mobile check-in, in-flight entertainment and electronic bag tagging” in regards to the intense global competition. The utilisation of an interactive application of RED, as well as the advanced browsing tool for frequent flyer users has been adapted to their global brand strategy in order for the improvement of quality and rewards for customers (Passport, 2013).

Additionally, it has been noted that this generation of innovations is particularly reliant on information technology (IT) and communications technology (Pansiri and Courvisanos, 2010). In saying this, it is crucial for companies to navigate their views onto the online society to accommodate to a wider market. The functionality of particular social media strategies has aided Qantas to expose the brand in an online approach. With the extensive improvement of new forms and technologies, the continuing implementation of these devices is crucial for company as well as the consumer experience.

2.5 Political and legal factors:

Reinforcing the fact that Qantas is a multinational company, the operation of its services must run in a highly regulated environment. Through global alliances and government regulation, the manifestation of air service agreements primarily dictates the spatial extent of the airline network (Coles and Hall, 2008). Amongst the complexity of the regulation of frameworks the aviation industry appear to regulate in, the requirement of considerable negotiations between global governments must be reiterated in some occasions when regulating their rights to specific routes and air space. Qantas continues to benefit from government protection in the Australia- Los Angeles route, where Qantas and United Airlines operate as a duopoly (Oxenbridge et al, 2010). Along with other alliances Qantas has tactically initiated, the air space is shared between Emirates, which inevitably upsurged their competition global position.

Furthermore, the implication of job security and the issues relating to Qantas’ legal dispute has created uncertainty for workers. With Qantas outsourcing their operations at a much lower rate of pay, has seized the attention of unions objectifying this notion. The major issued raised was the compatibility of the Fair Work Act in relation to the Qantas dispute. Forsyth and Stewart (2013) exemplify the issue of the ability of unions protecting their employee’s rights and jobs against the global competition of labour and outsourcing of jobs. This meant that in turn new enterprise agreements would be set out; pertaining Qantas to sought and revise their business strategy in the attempt to bargain with the unions. Nonetheless, this issue of the outsourcing of jobs is an increasing predicament resulting in long-term implications for workplace regulation in Australia (Forsyth and Stewart, 2013).

Conclusion

In this strenuous analysis, the difficulty of bestowing challenges faced upon Qantas has led to a tactical approach of forming alliances with the largest competitor in the aviation market. However, the application of internal and external factors must be applied in order to retain their market position. With its dominance of market share in the domestic market and increasing nature in the international segment, Qantas has the growth and potential to endure global forces imposing strategic approaches and marketing strategies.